Measuring Social Impacts

Written on April 18, 2007 by Max Oliva in Corporate Responsibility

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Bryan W. Husted, Director, IE Alumni Association Chair of Business Ethics and Corporate Social Responsibility
Although corporate social responsibility or variants like corporate citizenship are favorite buzzwords in today’s business world, surprisingly little effort is made by firms to actually measure the impacts of these programs. Do they really do any good? A recent attack by the Economist answers this question with a resounding, “probably not”!1 Unfortunately, current social reports fail to provide answers because of their focus on outputs, rather than on outcomes. The reasons for the failure to provide solid evidence of the efficacy of CSR programs are many. Some non-governmental organizations like Christian Aid have accused firms of using CSR as nothing more than a public relations gimmick 2. Academics have found that firms seem to be satisfied with simply doing something – anything, without worrying about actual impacts. In fact, firms rarely have a clear idea of the objectives they pursue through CSR programs, let alone measure actual impacts 3.
In part the problem has been one of looking for a magical measure of corporate social performance that summarizes a firm’s social impact similar to profitability, which provides a measure of economic performance. In reality it is impossible to encapsulate a firm’s social impacts in one number. I suggest that we need to start at a more basic level and simply examine the social, environmental, and economic impacts of corporate social activity at the level of specific projects. By focusing on CSR projects, firms can begin to use the methods of program evaluation, such as cost-benefit analysis, in order to assess the effectiveness of such projects.
The cost side of the evaluation is relatively straightforward as firms have fairly sophisticated accounting systems that allow them to attribute costs to specific projects, but the measurement of actual benefits is made difficult by a number of factors, including the lack of clear objectives, the lack of planning, and the lack of resources for evaluation.
When firms launch advertising campaigns, they usually have a clear idea of the goal they wish to achieve. There is a certain target audience that needs to be informed about a product or service. The firm can measure the level of awareness of the product or service achieved by the campaign. This level of clarity is often not present with respect to CSR. For some managers, simply doing good is enough. Yet the lack of clarity allows a great deal of managerial discretion in the development of CSR projects, some of which merely benefits the managers as evidenced by the recent scandals at Parmalat and Adelphia. The use of CSR to benefit managers is not surprising given that similar fraud exists within organizations supposedly designed to pursue the social good like churches and NGOs. The failure to establish clear goals only opens the door to this kind of abuse.

The lack of planning produces evaluation as an afterthought. In order to truly evaluate the effectiveness of any kind of project, it is important to measure how things (variables) were before implementation of the CSR project and then compare those values to corresponding measures after implementation. A project to help improve the health of a target population needs to examine the level of morbidity before and after the implementation of the project. Since evaluation often occurs as an afterthought, it is too late to look at the state of affairs before the project began.
However, simply looking at the before and after is not enough. Improvement in the desired social outcome may be due to many factors, not just the CSR project. It is vital to examine the change in the target group with a comparable control group. Only such a comparison can help establish causality between the CSR project and outcomes. In a very clear sense, CSR projects must be subjected to the same norms of experimental and quasi-experimental research involved in ordinary program evaluation.
Finally, firms fail to undertake this kind of evaluation because of the scarcity of human and financial resources. Cost-benefit analysis may make sense for large development projects sponsored by the World Bank or the United Nations. However, faced with a similar situation as firms, even most NGOs fail to evaluate their social development projects adequately. Firms may not see the value in carefully assessing the outcomes of their CSR projects.
Given resource constraints, firms minimally need to define the objectives of CSR projects and develop indicators of progress against which they can track the achievement or not of such objectives. Failure to do so only will provide fuel to arguments that CSR is nothing more than an elaborate PR program. In addition, prescient firms will include evaluation in the design of the project, allowing for measurements before and after the implementation of the project. More sophisticated designs involving control groups are desirable, but may go beyond available resources. If nothing else, firms need to understand the questionable nature of current CSR evaluation and begin to provide a more solid foundation.
1 Anonymous, The good company, The Economist 374 (8410), 11 (2005).
2 Christian Aid, Behind the mask: The real face of corporate social responsibility. Christian Aid: London, UK (2004).
3 Salazar Cantú, José de Jesús, La responsabilidad social de la empresa: Teoría y evidencia para México. PhD. Dissertation. Monterrey, Mexico: Universidad Autónoma de Nuevo León (2006).


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